When is our Market Going to Crash

I continually get asked if or when this crazy market is going to crash.  Because most people do think that it will eventually. 

The comments such as “there is no way we can sustain this growth” come out of the mouths of many who have been locals to our area their entire lives.  But many who have moved here in the last few years from other areas probably don’t see it the same way, as they don’t have stories of how much they paid for their first home in this area in 1963.

Will we sustain this growth?  Can we?  Maybe not at the rate of 30% per year every year, but it has been many years since our values have decreased in Waterloo region, and for good reason.  In fact, many good reasons.  

In the big picture, what is considered “affordable” or “expensive” is relative.  Our values are still quite affordable as compared to some other places like San Francisco or Midtown Manhattan.  The average detached house in Canada is about $200,000 less than in Waterloo region, but there are still some cities that are more expensive than our area.  And, although there are many places less expensive in Canada to live, they are also less desirable and have much less to offer in terms of employment or enjoyable activities.

Instead of thinking about this conundrum as to whether this crazy market can continue, let’s look at the positives as to why we may be in such a hot market to begin with.  Could it be because this area simply has a lot to offer?  The job market is among the best in the province and very diverse, we have two world class universities, public transportation is better than ever for anyone who doesn’t own a car or for families with only one vehicle, we have some great neighbourhoods close to the 401 which is ideal for commuters, our weather is perfect all year long, we can hear music playing year-round in the streets, our cost of living is significantly lower than that in the GTA, and, in spite of my jokes about the weather and the music, you cannot deny that the weather is fabulous much of the year and our Blues Festival which I hope you just enjoyed as much as I did recently is fabulous too.

I have to be honest – no one really knows the answer to this “When is our Market Going to Crash” question because no one knows what the future holds.  But, sometimes looking at the past can give you clue of what may happen in the future.  So, let’s go back to our most example of a hot seller’s market and look for some answers.

Back in 2017, when we had a big surge in the market, I was being asked the same question as to when I thought the market would crash, and I told people then that I really didn’t have any definitive answers.  But, as I always try to get people to think a bit more introspectively, I do tend to answer this loaded question with another question.  I promise, it isn’t payback for those putting me on the spot looking for a straight answer (haha!!), but simply to provoke the true reason they asked me the question in the first place.  It’s because they’re thinking about getting into the market.  Thinking is great.  However, there’s something called analysis paralysis and it could cost people hundreds of thousands of dollars if they get stuck in the “just thinking” phase and never actually take action.  

The question I ask is this, “What if the market doesn’t crash.  Then what?”  

If the market doesn’t crash and values continue to increase, how will waiting to get into the market impact you?  I have a lot of clients who were happy that I didn’t use scare tactics to get them to hold off buying, nor did I use scare tactics to convince them to purchase.  I just simply said that we have no guarantees in life.  Sometimes you learn more about things when you ask yourself the questions.  How long do they plan to stay in the house?  If someone is only planning to live in a home for a year or two, then maybe renting for a year or two is a better idea than taking a risk in case the values were to drop significantly.  

Because, the truth is, the market may or may not crash, and whether it does or not has really nothing to do with whether I think it will or won’t.  I’ve helped many people make a fortune in real estate.  I’ve also helped some save a fortune.  But I am not a fortune teller.  Some people just don’t feel comfortable making any decisions unless they know what the future holds.  My mom had a thing that she loved to say, “We can plan for life, but we can’t plan life.”  And life is a series of decisions.  No one can make your decisions for you, but I try to help people make wise choices, the kind that they can live with, the kind that give them peace of mind, the kind that don’t keep them up at night.  I think they are able to come to the right conclusions for them by asking themselves as many questions as they ask their Realtor because it really is a personal choice that affects the Buyer way more than it affects anyone else.

There are always differing opinions, and there are no guarantees of which voices are right and which are wrong because no matter how educated or how experienced we are, there are many factors involved.  Even though real estate is somewhat cyclical, there is no guarantee that every cycle will look anything like the last one.  Whenever people tend to speak in absolutes because they feel like they’ve been through this before, the logic can be off-base.  Of course, there have been crashes in the market in the past.  But, that doesn’t mean that the recipe that caused the last crash is being cooked up again.  There are just too many variables to know for certain what will happen in the future.  Covid has affected the market, and even if things are getting better on the Covid front, it has still changed the way that people think about how they live and work.

Many people who were looking to purchase back in 2017 were told by agents that they should wait until the market cools down.  I’m not sure whether or not these folks ever did buy, but if they did, I’m willing to bet that they paid much more than they would have had to pay if they hadn’t speculated so much.

We’ve had a few people recently who are probably wishing they hadn’t waited to buy.  Anyone who waited a year to wait and see could literally be looking at spending $200,000 more this year for a property that was $700,000 a year ago.  

So, what exactly is it that drives our local real estate market?  Is it the interest rate?  The political climate?  The global economical situation?  Or the good weather and good music?  People love to ask questions, but there are no simple answers.  Sometimes you just need to weigh it all out and come to your own conclusions.  And if you have lots of money in the bank, you can afford to wait and see if the market does crash, but if your savings account isn’t abounding with a surplus of cash, you maybe can’t afford to take this approach.  

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